Just a few of the run-ins I've had with them:

-I bought some sticky labels from a seller on eBay. He did not ship the labels, did not respond to emails or phone calls. After about 3 weeks I filed a PayPal dispute. Within 24 hours he shipped the labels and supplied the tracking number to PayPal. PayPal closed the dispute, because the package had been shipped. When I received the package, he had shipped me less than half the number of labels I paid for and they all said "Property of UPS - for shipping UPS packages only." Since I wasn't planning to ship with UPS these were worthless to me - and on top of that it was very obvious he had taken the free labels from UPS and resold them. I tried to dispute the payment again on the basis of 'product not as described' and PayPal said "we've already closed a dispute on this transaction, you can't dispute it again."

-Several times I've worked on websites for clients who want to accept PayPal, and the PayPal interface does not behave the way it is described in the documentation. For several months there was no way to override the sales tax calculations that PayPal made, despite some notes in the docs on how to do that.

-Another eBay seller did not ship his product. I attempted to dispute with PayPal, they wouldn't listen. Called my credit card company and disputed with them, PayPal sent me a nasty letter telling me I should dispute with them first.

On the other hand, I've had a few clients try to dispute their PayPal payments to me for services rendered. Even though I was clearly in the right and had the documentation to back it up (signed contracts, emails agreeing that the project was complete) it was nice that I didn't have to worry about proving my case, I only had to say it was a virtual product and PayPal closed the dispute.

You can find lots more at http://www.paypalsucks.com - some of those people are whiners, but many have legitimate beefs.